S&P shifts AppLovin view to negative

S&P said it revised AppLovin Corp.’s outlook to negative stable and affirmed the B+ ratings on the company and its upsized first-lien facility. The 3 recovery rating is 3.

“AppLovin’s leverage is high compared to similarly rated peers, and further debt-funded acquisitions could delay debt reduction plans. Given that AppLovin’s acquisition spending exceeds its annual free cash flow generation, we believe the company could continue relying on the debt markets to fund its larger acquisitions, thus limiting the long-term improvement of credit metrics,” S&P said in a press release.

S&P said the outlook reflects the view that leverage reduction will be predicated on substantial revenue growth over the next year and Applovin’s aggressive acquisition policies.

“We expect AppLovin to achieve full growth and EBITDA expansion in 2021 that should support deleveraging, though the outlook also reflects the risk for further leveraging debt-financed transactions,” the agency said.

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